For each situation, identify whether it is treated as a prior period adjustment or change in accounting estimate. 1. Upon reviewing customer contracts, the company realizes it mistakenly reported $110,000 of revenue instead of the actual amount earned of $11,000. This mistake occurred two years ago and had a material effect on financial statements.
2. After using equipment for the past six years, which had an estimated useful life of ten years and no salvage value, the company revaluates the equipment and now estimates the salvage value to be $10,000.
3. An assessment of expenses uncovers that the company incorrectly capitalized research and development costs three years ago. This error had a material effect on financial statements.
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Upon reviewing customer contracts, the company realizes it mistakenly reported $110,000 of revenue instead of the actual amount earned of $11,000. This mistake occurred two years ago and had a material effect on financial statements. Situation 1 Required 2 > Change in accounting estimate Prior period adjustment

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine

Factors like the unemployment rate, the stock market, global trade, economic policy, and the economic situation of other countries have no influence on the financial status of individuals. ( t or f)

Pear co.’s income statement for the year ended december 31, as prepared by pear’s controller, reported income before taxes of $125,000. the auditor questioned the following amounts that had been included in income before taxes: equity in earnings of cinn co. $ 40,000 dividends received from cinn 8,000 adjustments to profits of prior years for arithmetical errors in depreciation (35,000) pear owns 40% of cinn’s common stock, and no acquisition differentials are relevant. pear’s december 31 income statement should report income before taxes of